Scenario:

Mike MacCloud is a young businessman who has decided to start his own wine business. After years of working in the industry as head of operations he has gained deep experience in the business and wants to create his own brand. After doing a market study, he has identified the ideal location of the land, the building where he will make the wine, the financing he will need, the transport costs, the necessary labor and the costs of fertilizer and irrigation of the vines.

The activity will be carried out in four steps: the first is the individual reading of the activity where the questions to be solved are specified; the second, to follow the teacher's explanations for a good understanding of them; the third, the group activity, where they will share the answers that each member has obtained from individual reading. This requires collaborative work, commitment to the rest of the classmates and active participation in the discussions; finally, the presentation of the conclusions.

You have to answer the following questions:

1. Do you see the decision by Mike to rent the building compared to the option to buy as being correct? What accounting and business implications does one option or the other have?
2. How should Mike deal with expenditure on land, vineyards, vine planting, fertilizers, and water? Be specific in the treatment over time, including the reasoning for a conclusion.
3. Do you see Mike's decision to apply for a loan from the bank as being correct? Does the way to amortize the loan seem correct? What alternatives could be considered?

Consider the following factors:

Mike's greatest concern is that his vines could contract Phylloxera disease, "Black Goo" syndrome, or Pierce's disease. While these conditions do not kill the vines immediately, they reduce production of quality grapes by approximately 50 %. Furthermore, the vines generally die approximately 10 years after contracting the condition. While Mike will probably be able to avoid Phylloxera by planting genetically treated vines, incidents of 'Black Goo' and Pierce's disease have been increasing over the last few years and are most dangerous to vines that are less than three years old.

1. How should these potential threats be reflected in the financial statements if the vines have not been diagnosed with any disease?
2. How do they change if the vines are diagnosed with some disease? Explain the reasoning to justify your answer.
3. Once the business start-up has been analyzed, what problems would you say the company may have in the future from a business viability and cash flow point of view?

Could you please indicate the bibliography for these questions?